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Jan 20
Phase-1-&-2-ESAs-commercial-properties

Phase I & II ESA Walkthrough – Commercial Property

What Is A Phase I / Why Do I Need One?

Whether it is your first commercial property or your fourth, you may have heard the term Phase I Environmental Site Assessment being thrown around.  A Phase I Environmental Site Assessment helps determine if a property may have been contaminated by current or previous activity.  Phase I ESAs help protect the purchaser of the property and limit liability by discovering potential environmental concerns prior to purchase.

When purchasing property, your lender may require a Phase I ESA to be performed on the property. This is to help evaluate if an environmental risk could devalue the property, impact the borrower’s finances, or open up a larger problem down the road. 

The Phase I Procedure:

The Phase I ESA process begins with the evaluation of the property in its entirety. This includes an on-site inspection, the collection of historical and environmental documents, and meeting with current and past occupants. To save yourself time and money, a Phase I ESA should be completed by qualified professionals who have credentials, are educated in their respective fields, and have years of hands-on experience. 

Here is a comprehensive breakdown of the components to a Phase I ESA:

Site Inspection: 

This includes:

  • Thorough visual inspection of property structures: interior, exterior, 
  • Inspection of property characteristics and property lines in accordance with the national standard for Phase I ESA
  • Reviews the uses of nearby properties.

Documentation Review (Environmental & Historical)

  • We are required to review regulatory records that may reveal known releases or spills on the property or nearby.
  • Records may also reveal risky activities such as hazardous materials handling and storage that may have contaminated the site. These will need to be properly remediated.
  • A property seemingly free of environmental hazards may have been affected by surrounding properties.

While a property may not have any apparent issues, it is important to perform an environmental site assessment. This can lead to an unexpected discovery of contaminants that have made their way onto the property. Common discoveries include pesticides, contaminated soil, and groundwater.

Interviews

  • Current and former tenants of the property can provide a wealth of information and critical insight about the property and its history. These accounts and information should be backed by documentation.

Report

  • From all of this information, Alpha Environmental will draft a report that includes everything that was uncovered and any conclusions. We also provide recommendations to address Recognized Environmental Conditions (a.k.a RECs)

Usually, the Phase I ESA procedure takes anywhere from 2-4 weeks. Here at Alpha Environmental Services Inc., we can also provide Rush Options to expedite the process upon request.

Upon the discovery of any RECs, we would then recommend moving onto Phase II

What Is A Phase II ESA? 

A Phase II Environmental Site Assessment investigates suspected environmental hazards. This includes sampling followed by laboratory analyses to confirm or deny the presence of any hazardous materials that have been discovered from the Phase I. Depending on the results of the samples; the Phase II ESAs will outline any additional site investigations and potential remediation procedures to bring the property up to national standard. Here is a breakdown of the Phase II procedure:

The Phase II Procedure:

Sample Collection:

  • Collect and analyze air, soil, groundwater and or site building materials to assess the presence of suspected hazardous material
  • We will use this information to get an in-depth understanding of environmental liabilities and the financial impacts of such liabilities

Remediation 

  • Alpha Environmental will then offer remediation strategies as well as estimates on remediation costs

The Phase II process can take anywhere from a few weeks to a few months. The remediation timeline is dependent on the type of clean-up that is needed to bring the property up to national standards.

Why Experience is Important

Choosing qualified, accredited, and experienced environmental consultants help ensure the protection of your client’s interests. When looking for an environmental consulting company, it is important to assess their years of experience, their qualifications, and the knowledge they bring to the table. This is especially important as there are instances where buyers are forced to spend an additional ten of thousands of dollars due to improper Environmental Site Assessments.

Another concern for most potential buyers is their budget, leading some to choose a cheaper route. Many consultants offering “competitive” or “affordable” rates may cut corners, have no legitimate credentials or no guidelines.

To better understand the importance of experience, here is a common scenario that plays out with improper ESAs coupled with a lack of experience.

Scenario: Commercial Properties

Joe is looking to purchase a commercial property with $10,000 as a down payment. His intention is to turn an old commercial property into an old fashioned diner. The lender (the bank) tells Joe that the purchasing process requires him to perform an Environmental Site Assessment. Joe researches consulting companies that serve his locale and narrows down his search to a handful of companies. After getting some estimates and a basic understanding of what a Phase I and II ESA entails, he decides on a company known as XYZ Environmental. After he is given a run-down on XYZ’s Phase I & II process, Joe decides to hire them to perform a Phase I ESA and a Phase II if need be.

Over the course of a few weeks, the company inspects the site, gathers documentation, and conducts interviews with previous/current owners. Upon finishing, the consultants generate a report. XYZ Environmental report to Joe and inform him that the property was once an old dry cleaning station. Based on their findings, XYZ Environmental suggests a Phase II remediation for Tetrachloroethylene (PCE), which is a chemical cleaner used by most dry cleaners. After investigating the site, the company suspected that PCE might have made its way into shallow soil beneath the old commercial property. Upon hearing this, Joe agrees to a bid of $10,000, takes the Phase I assessment to his lender, and commences Phase II.

The company’s suspicions are confirmed as they discover contaminated shallow soil. This, in turn, begins the remediation process on Joe’s commercial property. However, it is later revealed that the PCE plume has contaminated not only the shallow soil but also the groundwater beneath the shallow soil. Unfortunately for Joe, the small oversight on the property does not meet DEQ standards (Department of Environmental Quality). Additionally, Joe is forced to pay additional tens of thousands of dollars out of pocket to remedy the PCE plume. All of this could have been avoided if the consultant company had made the discovery initially. Furthermore, researching the XYZ Consultant’s company work experience, overall knowledge in Phase I & 2 ESAs, and credentials would have ensured peace of mind.

Phase I & 2 assessment procedures should be handled by companies who have had years of experience and education. If you are in need of Phase I or 2 ESA, contact us today by filling out a simple contact form here or give us a call at 503.406.6686 for more information.

Matthew Micheletty

About The Author

Matthew has been Alpha's Director of Operations for over four years. He works directly with our clients in effort to provide exceptional customer service as well as managing the day to day of the company. When he's not at the office, you can find him at Red Tail Golf Club or cruising PDX in one of his project cars.